Xbox One Release Not A Loss Leader, Is PlayStation 4 Sold At A Profit As Well?

The Xbox One release will not be a loss leader, with each console sold at a profit, but will the PlayStation 4 be making money for Sony as well?

As previously reported by The Inquisitr, a Xbox One and PlayStation 4 hardware cost comparison is difficult to make.

The Xbox One costs $499 while the regular PlayStation 4 costs $399. But the Xbox One comes standard with the Kinect 2.0 while the PlayStation 4 Camera bundle is a separate deal and also costs $499.

Both gaming consoles have BluRay, 500GB hard drives, WiFi, and one controller as standard, although the PS4 has a touchscreen built into each controller. The most expensive internal components tend to be the CPU, GPU, and the memory.

But both the Xbox One and PlayStation 4 hardware is largely made by the same company, AMD. Such a price comparison might be a wash since the PlayStation 4 and Xbox One System On a Chip (SoC) APUs might be similar in complexity. The PlayStation 4 GPU and GDDR5 memory may be more complex and thus expensive, but the Xbox One embedded storage and high speed eSRAM might make up the cost difference.

Microsoft’s Yusuf Mehdi explained how the Xbox One is not a loss leader:

“The strategy will continue which is that we’re looking to be break even or low margin at worst on [Xbox One]. And then make money selling additional games, the Xbox Live service and other capabilities on top. And as we can cost-reduce our box as we’ve done with 360, we’ll do that to continue to price reduce and get even more competitive with our offering.”

Offering a “loss leader” means to sell a product at a loss in order to make money in other ways. For example, the McDonald’s dollar menu tends to be loss leaders, but they make money on drinks and more expensive menu items.

Nintendo introduced the concept of the loss leader to the gaming industry a long time ago, although the Wii and Wii U was supposedly sold at a small profit. The original Xbox and the Xbox 360 were very large loss leaders, sinking Microsoft’s profits into the negatives for quite a while. But Microsoft did this in order to take market share away from Sony and Nintendo.

Considering the Xbox One is not a loss leader based upon the standard package which includes the Kinect 2.0, it’s possible to conclude the PlayStation 4 might be as well. But Sony has not confirmed anything to this effect.